PZ Cussons (Holdings) Limited has proposed a N21 per share offer to the minority shareholders of PZ Cussons Nigeria Plc to be implemented under a scheme of arrangement.

Informed analysts say it is a strategic move by the company to prepare for a “smooth exit” from the Nigerian market amidst ongoing reforms of the government.

PZ Cussons Nigeria currently has 3,970,477,045 units of shares listed on the Nigerian Exchange Limited (NGX), The ICIR can report.

In a notification on Monday, September 4, to the investing public and signed by its acting company secretary, Olubukola Olonade-Agaga, PZ Cussons Nigeria said the core shareholder, PZ Cussons Group, had informed its board of directors of its intention to acquire the shares held by all the other shareholders of PZ Cussons Nigeria. However, media reports say the minority shareholders have rejected the offer.

The Nigeria subsidiary further disclosed that the proposed transaction would be subject to prevailing market conditions.

According to PZ Cussons Nigeria, the transaction became necessary to enable the company to simplify and strengthen operations in Nigeria.

“It is intended that the Proposed Transaction will be implemented under a Scheme of Arrangement in line with section 715 of the Companies and Allied Matters Act, No.3 of 2020 (as amended) and other applicable rules and regulations.

“This will require the company to convene a court-ordered meeting of its shareholders by the directive of the Federal High Court,” it added.

The proposed N21 per share could have been arrived at based on earnings to book valuation of the company, an investment and portfolio analyst, Abel Ezekiel, told The ICIR.

He noted that the company, for a while, has experienced a downward movement of its market price but started moving upward from last year on the improved financial report or earnings since last seen in the previous years.

“So arriving at N21 could depend on current performance and valuation of their asset vis-à-vis liability, dividends, etc., and the company cannot do better than what it has offered their investors,” Ezekiel said.

Checks by The ICIR showed that the share price of PZ Cussons Nigeria closed at N19.15 on Tuesday, September 5.

A smooth exit from the Nigerian market

The ICIR recently reported why two consumer goods and manufacturing companies exited the Nigerian market.

On August 4, GlaxoSmithKline (GSK), a British multinational pharmaceutical Group, notified of its exit after 51 years of operation.

On April 6, Unilever Nigeria Plc also announced to close its operations in Nigeria after about 100 years.

A manufacturing and distribution company in the business of personal care, home care and electrical products, PZ Cussons Nigeria, which has been in Nigeria since 1899, is seemingly taking the exit door.

“One can only guess that it may be connected to recent changes in the FX policy, which has sent many import-dependent multinationals into panic,” another analyst, David Adonri, shared his view with The ICIR.

He believes the “delisting” may be a strategic move by the company to prepare for a smooth exit from Nigeria if the ongoing reforms go against their interest.

The ICIR had in a report on August 1 showed that many companies, especially manufacturing companies, are faced with dollar-denominated obligations arising from the exchange rate unification.

“Multinational companies are in host countries to make a profit and to use them as a market for their parent companies. Any threat to these objectives is intolerable to the parent companies and can result in harsh decisions,” Adonri said.

Reasons companies delist from the exchange

Several reasons abound why companies delist from the exchange, Ezekiel stressed.

It includes stringent post-listing requirements like the quarterly release of financial reports and the attendant high cost of hosting annual general meetings (AGM) and extraordinary general meetings (EGM).

“Other reasons include difficulty in repatriation of dividends by most of these multinationals, massive devaluation of the domestic currency which impacts negatively on these organisations, challenges in sourcing their input materials which are not readily available locally, difficulty is sourcing forex, high cost of OPEX which erodes margins.

“High cost of listing always slam on these companies by the regulatory bodies, undue fines, exposure of your financial report to competitors, high taxes they are numerous so most avoid all these problems and the best way is to go out of our exchange and remained at a level where no one gives them undue hassles,” he said

Adonri added that it was vital to note that most of these multinationals did not list voluntarily.

He said, “They were compelled during the indigenisation exercises of the 1970s to do so. Perhaps they feel that this is the right time, after several years of liberalised foreign investment policy, to reclaim full ownership of their enterprises.

“It might be unnecessary to bemoan these exits from the Capital Market because as old companies exit for one reason or another, new quality companies also come in to enjoy the benefits of listing. The secondary market is booming right now, but the only challenge is how to form capital through the market for enterprises in the strategic sectors of the economy and get them listed afterwards.”